Shares in Winbond Electronics Corp (
Market watchers expect demand for memory chips will heat up in the second half of the year. In addition, local media have reported that the government funds had targeted DRAM and foundry stocks because of these companies' good prospects for strong sales and
profits.
Winbond, Taiwan's third largest chipmaker by revenue, has now risen in three out of the last four sessions. Yesterday, it broke through its six day average price of NT$76. During the same period, the TAIEX has risen only once.
"We saw some very large orders today," said Andrew Teng, semiconductors analyst at Taiwan Securities Corp. "I saw a large order for 1.3 million shares at 12pm," he said.
Winbond's turnover yesterday, at 31.1 million, was the third highest in the market, and a good sign of renewed interest in the stock from institutional investors, Teng said.
For a company with very good fundamentals, a stock price of NT$70 to NT$75 is attractively cheap. "If you want to buy this stock, now's the time," Teng said.
Winbond will also benefit from an increase in the spot price for DRAM in the near future. "Just by looking at the rising demand for motherboard shipments, I think it's a matter of time before the spot price breaks through US$9," Teng said.
Yesterday, the spot price of 64MB DRAM hovered between US$8.21 and US$8.7 on the American IC Exchange. Rising spot prices pulls up contract prices, which increases profit margins for DRAM makers.
Ivy Lai, an associate at Barits Investment Services, also expects a rise in the price of DRAM, and is impressed by its price stability. "Because of the DRAM supply shortage in the next half year, the DRAM price will increase in the near future," she said.
"Now the price is around US$8.5. Even though the US stock market's gone down, the DRAM price is still the same," she said. Lai has a long-term price target of around NT$120 for Winbond.
Winbond's revenue figures for July, to be released this Thursday, are expected to top NT$5 billion, according to local media reports. The company's first half revenue of NT$21.2 billion was 63.6 percent higher than the same period last year. The company is expected to benefit from rising DRAM prices and an increase in production during the second half of the year, the reports said.
In October, Winbond will move to 0.175 micron manufacturing process technology. The move, from 0.2 micron process technology now, will increase production yield and reduce DRAM production costs to US$3.28 per chip, according to a report in July by Barits Investment Services (BIS).
Monthly revenue will subsequently increase sharply, the report said. Other securities houses predict chip production costs of nearer US$4 per chip following the migration to the 0.175 micron process. Based on the figures in its report, BIS predicts Winbond's earnings per share will reach NT$5.03 this year. The figure is at the high end of local securities houses' estimates.
"This year, we think Winbond can make [an earnings per share of] NT$4," said TISC's Teng. "I don't think the fundamentals of those DRAM shares have changed; it's just the valuation," he said, referring to the currently low share price of DRAM makers.
Last year, Winbond reported an earnings per share of NT$1.38 and a net income of NT$4.45 billion.
Bhavin Shah, head of Asian technology research at Credit Suisse First Boston Ltd, said last week that he expected Winbond's earnings per share to rise to NT$4.30 this year based on a stable DRAM pricing environment over the next 18 months.
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